Wake Up, Philippines!

Investment guide for 2009

Posted in Investment, Personal Finance, Tips by Erineus on February 3, 2009

IF INVESTING HAD YOU FLUMMOXED IN 2008 like most individuals who put money in stocks, bonds, mutual funds and other forms of investments, you might be looking for a big rock to hide under this year hoping that when you wake up, the markets have finally turned.

Since Wall Street has begun to seriously doubt widely held beliefs about investing in the face of the worst financial crisis after the Great Depression, how can a small market like the Philippines escape such a bearish outlook?

It appears, however, that the old saying about optimism and Filipinos still holds true–even in personal investing.

An online survey at Inquirer.net shows that Filipinos are not about to throw in the towel when it comes to growing their personal investments. In fact, they plan to invest more by spending less, keep contributing to retirement plans, and continue paying for real estate purchases.

Cautious optimism

Granted, an online weblog is hardly a scientific way of measuring investor sentiment and the learnings are anecdotal at best. Still, they provide information that are not readily available.

“I am in my late 20s and when I saw the stock market go down more than 40 percent, I aggressively invested a significant amount of my portfolio in depressed stocks. I believe in two years’ time, earnings will bounce back and stocks will rebound. Who knows, we may have the same boom as year 2006,” says JM.

Most of those who responded echoed his outlook. Of course, some were more cautious.

“If your timeframe is 20 to 30 years ahead, then I don’t see a need to enter now. Better wait for a clear trend to emerge. Currently it is down, so stay out. Once an uptrend resumes, then enter. Bull markets take five to seven years to unfold, so no harm done if you miss a year or two,” says Melvin.

Chase Yap, vice president at 2TradeAsia.com, says in the fourth quarter of 2008, some investors have started to come back to the market albeit very cautiously.

He says the roller coaster ride in equities last year has made investors look hard at their trading behavior and it also gave them a chance to fine-tune their strategies for the future.

Experts also believe that 2009 will be a tough year for personal investing because it’s at the tail-end of years of unnatural market movements.

“In my thinking, the natural movement of a market is two steps forward and one step backward. This comes from observation, not theory. It’s not unusual for a market to pause every now and then. If a market does not rest, it will get sick just like a person who works five days without sleeping,” says Alexander Gilles, a chartered financial analyst.

World markets Japan, Europe, the United States, and the rest of the world including the Philippines were all on the way up for five or four years starting in 2004.

“That’s not normal. That’s like a guy walking with left foot, left foot, left foot and then right foot. Normally, markets go zigzag and if they go up nonstop, there’s going to be a difficult fall after that,” he says.


Difficult fall notwithstanding, gains in personal investing are not impossible for the long-term especially if certain guideposts are heeded. Yap says there are still things that remain true even in this very bearish market, and these include the following guideposts:

1. Examine your investment objectives. Most individual investors, whether in the Philippines or in more advanced markets, are obsessed with the Holy Grail of high returns without first understanding their investment objectives. Gilles recommends finding out first if you prefer rising share prices or a steady stream of dividends or both. In the case of bonds, bond principal plus the coupon account for total return.

“Either you want your money to compound year after year through interest or capital gains, or you want to draw down on income or cash dividends. Or you want both,” he said.

For 2TradeAsia.comís Yap, the bear market in 2008 made dividend-paying stocks shine.

“Dividends are particularly useful in a down market when it’s not easy to sell your shares for cash. Dividends give you a cash flow on your stocks and give you an option not to sell at low prices,” he says.

Brokerage analysts have often identified Manila Water, Philippine Long Distance Telephone Co., Bank of the Philippine Islands and Globe Telecommunications to pay good dividends even in market downturns. In 2007, PLDT gave its shareholders up to 70 percent of the previous year’s income as dividends while BPI gave out 90 percent inclusive of special dividends.

Carefully thinking through investment objectives requires a careful look at unique, individual needs. If Junior is going to college in four years’ time, for example, you would need cash on the fourth year but still need to grow the remaining amount of the college pot for the following years he would have to burn his eyebrows studying. Instead of merely looking for an investment with the best returns, crunch the numbers for a clearer idea what investments to choose.

“It’s like looking at a car. You don’t just look at the tires and the paint. You have to look at the engine,” says Gilles.

Time horizon

2. Determine your time horizon. When stock investments are tanking, it’s not easy to keep a recovery image glued in your mind’s eye, but over 75 years in US market history and 25 years in the Philippines show that they do recover.

“Think in terms of 10 years, not 20 days,” says Gilles. Although that’s conventional wisdom that US investors are beginning to doubt now because of the current crisis, Gilles and Yap insist that stocks do recover in the long term.

“For a 20-year or 40-year time horizon, you would not hesitate to get into an equity investment even in this depressed market. Stocks go up 15 percent to 25 percent a year in a horizon of 20-40 years,” Gilles says.

Yap explains that those in their 20s to 30s who still have many working years ahead of them can assume more risks and lean more toward equities and less toward bonds. The opposite is true for those in the home stretch, say in their 50s to 60s, who should be looking more toward secure fixed-income investments.

“If I am in my 60s, I would have a good 70 percent of my investment in fixed income to have that peace of mind,” he says.

Those in their 40s who have a good 20 or 30 years to work can still take some risk and should put half in stocks and half in bonds.

3. Examine your ability to take risks. Ask yourself if you can take the tension and the stress of market volatility. If you can’t, stay out of the market and prepare to get by with a return of 2 percent a year from bank deposits.

“Only people who can take the stress will win. You can stick to time deposits but you will never achieve your investment objectives. You go in there with a fearful attitude, nothing will work,” says Gilles.

Knowing yourself, however, is not as easy as it sounds. Sometimes, investors who think they are risk takers find themselves shaking when the market is under severe volatility. But here are some clues: Gilles says that some indications of ability to take risks include being entrepreneurial, a liking for adventure sports, meeting different kinds of people and the ability to driving fast but safe.

4. Take a view, justify it and make a bet. Part of investing is the capability to process what is going on in the economy, taking a view and making a bet. Blaming other people for investment mistakes, especially in a bear market, may be what most people resort to but it is never helpful, says Gilles.

“The people who sell during a slump, like now, are afraid that prices will go lower,” Gilles says.

But he explains that for the market to go lower, this would imply that the Philippines has a growing budget deficit, a growing current account deficit and capital account deficit, which it doesn’t have. It would imply that the country is 80 percent dependent on foreign oil like in 1980, which it is not. It would imply that interest rates and inflation are worsening–all trends that are quite the opposite of what is happening.

“(Fear that the market will go down in the long-term) is totally nonsense because it implies a whole set of assumptions which are false,” Gilles adds. “If you are gloomy, ask yourself whether you have justification or whether you are gloomy just because everyone else is gloomy,” he says.

5. Seek investment counseling. Following hot investment tips is a sure sign of amateur investing, and will burn anyone. Serious investors go for investment counseling from qualified professionals instead of looking for hot tips.

“You cannot generalize. Some people can take the tension, some cannot. You need a deeper, customized, individualized portfolio consultancy,” Gilles says.

Investors who develop ulcers watching market volatility may either make do with the comforting staidness of time deposits or get a professional to do the driving of their investments for them.

Whether considering investments in stocks, bonds, mutual funds, bank instruments, properties and other tangible assets, own business, venture capital or private equity, experts still think following sound guidelines will give good long-term returns–even in a bear market largely expected for 2009.

(For more personal finance articles, go to MoneySmarts at http://blogs.inquirer.net/moneysmarts .)

By Ma. Salve Duplito
First Posted 21:37:00 01/11/2009

How to extend your appliances’ life

Posted in Leisure, Lifestyle, Personal Finance, Tips by Erineus on February 3, 2009

Homeowners can significantly extend the life of major household appliances by observing preventive maintenance. This helps keep devices running as smoothly and as long as possible. Repairs cost money but replacing a major appliance can really dent one’s budget.

Save thousands of pesos with these preventive maintenance tips shared by Orland Rivera and Rodel Villamor of Western Marketing, Festival Mall Alabang branch and main office, respectively; Joel Tiu of Ansons Makati: and Robert Rosete of eShop Computers in Alabang, Muntinlupa.

A word of caution: always remember to disconnect plugs from the power source before you start cleaning.

Washing machine – Make sure this is set up on an even flat surface. Unbalanced machines cause uneven distribution of wash loads and may cause the appliance to “walk” or move little by little, which can eventually damage the barrel.

Don’t load your wash to above the maximum capacity (i.e., stick to 5.5 kg or less if your machine says 5.5 kg!). Every six months, check the hose for leaks and kinks, and replace promptly if needed as cracked hoses waste water. Periodically clean the lint screen by turning it inside out and washing it with soap and warm water to eliminate buildups. Check the hose vent for clogs.

Refrigerator – After delivery of a new ref, wait at least eight to 10 hours before plugging in. Let the Freon settle down first. If you live in areas where electricity fluctuates, protect your ref with an auto-voltage regulator (AVR).

Don’t load too many food items inside the ref; this makes the blower work harder. Twice a year, clean the condenser coils located either at the back (for older models) or the front (newer models have grills that cover the coils near the bottom) of your ref.

When defrosting freezers, never scrape ice from the walls to avoid damaging the appliance. Merely turn off the ref and remove all the food. Clean the ref’s interior while you’re at it. To check the gasket, close the door on a piece of paper and pull. If it easily slides out, it’s time to replace the seal.

Air conditioner – Always follow the rule of starting the aircon in fan setting for a minimum of three minutes before turning it up to high-cool to avoid overworking the compressor. Sustain airflow by cleaning the filter monthly with soapy water and a soft toothbrush. Wipe the exterior with a damp cloth and remove all debris from the central air unit to maximize air current.

Electric fan – Once a week, remove and clean the blade and grills. If you are adept at dismantling things, you can remove the shaft and apply industrial grease/oil to postpone wear and tear of the bushing parts. Let the grease dry for about three hours before using the unit again so the oil won’t enter the motor.

Television and DVD player – Avoid placing the TV near a window where splashes of rain could damage the circuits. Wipe the exterior with a damp cloth. Clean DVD players using a commercial disk cleaner once a month and remember to wipe CDs thoroughly with a soft, non-abrasive cloth before playing. Take good care of the remote controls as well.

Microwave – Never put any metals inside (and that includes aluminum foil!) and don’t let splattered food stay inside for long. Use only microwavable dishes for heating. Before cleaning, heat a cup of water with a teaspoon of baking soda in a bowl for three minutes. This makes it easy to wipe off all sticky food particles with a sponge or soft cloth right after. Don’t forget to clean the door gasket too.

Rice cooker – Dry the bottom of the pot before putting it over the hot plate every time you cook rice. Position the cooker on a flat, even surface. Clean up any overflow on the sides right after cooking.

Electric air pot – Always boil water at the correct water level. Avert or remove hard water deposits by pouring pure white vinegar just above the water stain. Boil in one cycle, leave overnight, then clean as usual. Remind members of the family to gently press on the controls so as not to damage the pads.

Avoid abusing and misusing your appliances so that they last longer. By finding time to make preventive maintenance a habit, you not only get the most out of your home appliances, you also save money in the process. In this case, the old maxim “an ounce of prevention” is certainly “better than a pound of cure.”

(This article is from MoneySense, the country’s first and only personal finance magazine. Visit http://www.moneysense.com.ph for more.)

By Ruth Manimtim-Floresca
First Posted 13:08:00 01/08/2009